Selling an Inherited House to a Family Member in Michigan

Can You Sell Below Market Value or Use Seller Financing? Here’s What to Know

Inheriting a home from a loved one in Michigan is often bittersweet.

While the property may hold sentimental value, you’re also left with the practical and emotional task of deciding what to do with it.

If a family member wants to buy the home, it can seem like a win-win. But underneath that goodwill are important questions about taxes, fairness, and legality.

Can you sell it below market value?

What if you want to help them out with flexible payments?

These questions are common—and answering them properly can save everyone from stress, conflict, and unexpected bills.

What This Topic Means in Michigan

In Michigan, selling an inherited house to a family member is legal—but there are important tax and title considerations.

In most cases, you don’t need to go through a real estate agent, and you can agree on whatever price you choose. However, selling below market value may be considered a gift by the IRS. That means you may need to file a gift tax form, and the transaction could affect your estate planning later.

Additionally, Michigan law allows seller financing in some private transactions, including family sales, without needing to be a licensed lender. But there are limits, and knowing when it’s legal to offer terms yourself can help avoid legal trouble.

Finally, local property assessors may reassess the home’s value after transfer, especially if the transaction is not at full market price. That could result in a new property tax bill for your relative.

How This Affects Selling an Inherited Home

Many Michigan families run into unexpected roadblocks when selling inherited property within the family:

Delays due to probate: If the property hasn’t been legally transferred to your name yet, you may not have the authority to sell it—no matter who the buyer is.
Emotional pressure: Selling to a sibling or child may feel easier than listing publicly, but it can also stir conflict among other heirs who feel left out or underpaid.
Legal confusion: Without an appraisal or proper paperwork, it’s easy to trigger gift tax obligations or break IRS reporting rules.
Risk of uncollected payment: If you offer seller financing, what happens if your relative can’t pay? Foreclosure between family members can quickly ruin relationships.

Understanding your legal position—and getting the documentation right—can help you avoid unnecessary family tension or costly tax surprises.

Common Scenarios You May Be Facing

Here are some typical situations we see in Michigan:

You want to help your child buy the home affordably
You inherited a home in Warren or Livonia and want to sell it to your adult child at a reduced price. You’re not sure whether this counts as a sale or a gift—or both.

You’re dealing with multiple heirs but only one buyer
You and your siblings inherited a home in Flint. One of you wants to keep it and buy out the others. But not everyone agrees on the price or timeline.

You want to structure payments over time
Your nephew wants the home but can’t qualify for a mortgage. You’re open to letting him pay you over time, but wonder if it’s legal to act as the “lender” and how to report the income.

You’re unsure how to document the sale
You want everything above board but aren’t sure if you need an appraisal, purchase agreement, gift letter, or tax form.

Are You Trying to Understand Your Options?

Talk to Dennis Now – (734) 224-5977

What Are Your Options?

If you’re planning to sell an inherited house to a family member in Michigan, here are your best options:

1. Get a professional appraisal
This establishes the fair market value (FMV) and protects both parties. It also helps avoid IRS scrutiny. If you sell for less than FMV, the difference may be considered a gift. You may be required to file IRS Form 709 if the “gift portion” exceeds the annual exclusion limit ($18,000 per recipient in 2024).

2. Use seller financing legally
Michigan allows private sellers to finance homes without a license in limited cases. If this is a one-time family sale, you’re likely exempt. Details can be found under the Michigan Mortgage Loan Originator Licensing Act.

3. Create a clear purchase agreement
Even with family, write up a formal agreement. It should include the sale price, terms, contingencies, and disclosures. This protects both parties and keeps the probate court (if involved) satisfied.

4. Account for tax implications
Inherited properties get a “stepped-up” cost basis—meaning the value is reset to the date of death, which may reduce capital gains. But if you sell the house years later, appreciation could result in taxable gain.

5. Talk to professionals
An estate attorney or CPA can guide you through gifting, installment sales, and IRS forms. It’s worth it, especially if multiple family members or high-value property is involved.

Final Thoughts

If you're looking for a broader understanding of probate, inheritance, and home sales after a loved one passes, check out our guide on Selling an Inherited House in Michigan.

Selling an inherited home to a family member can feel like the right thing to do—but it still needs to be done right.

A little preparation now can prevent hurt feelings, tax problems, or financial confusion later. Take your time, talk to the right professionals, and don’t be afraid to ask questions.

If you’d like help understanding your next step or figuring out the paperwork, we’re happy to talk.

"When you mentioned that you would give us an offer within 24 hours and then close quickly I didn’t really believe that we would have the house sold in only 2 weeks. I’m glad I found you.”

Michelle L. - Michigan

FAQ: Selling an Inherited House to a Family Member

Can I sell an inherited house in Michigan to a family member for $1?
Yes, but the IRS will treat the difference between $1 and the fair market value as a gift, and you may need to file Form 709.

Do I need an appraisal to sell a house to my child or sibling?
It’s not legally required, but it’s highly recommended to avoid tax disputes and ensure fairness among heirs.

Can I offer seller financing to a family member in Michigan without being licensed?
Yes, if it’s a one-time sale of a property you own, you're generally exempt from Michigan lending laws.

What if my siblings disagree with the sale price to a family member?
You may need to negotiate a buyout or have the house appraised and split proceeds according to probate terms or inheritance rights.

Is the stepped-up basis automatic?
Yes, the IRS allows a stepped-up basis to fair market value at the date of death, which helps reduce capital gains when you sell.

See why so many people recommend us...

“Mr. Fassett – thank you for working with us to buy my Mom’s home after she passed away. When you mentioned that you would give us an offer within 24 hours and then close quickly I didn’t really believe that we would have the house sold in only 2 weeks. I’m glad I found you.”

Michelle L. - Michigan

“Thanks for buying my Mother’s home. It was a big help that you were able to buy it without us having to clean it out and get it ready to sell. My mother had accumulated lots of stuff and after the stress of her long illness I was exhausted and I dreaded dealing with all of it. I also liked it that you gave me a very fair price for the home. I’m on a fixed income and that really helped a lot.”

Henry G. - Michigan

“Dennis – thank you for helping us with our Mom’s home. This was a very traumatic experience for us, and we appreciated your patience with all the emotions we experienced during the process. You were really patient and understanding with us during the sale process, and we’re sure that Mom’s home will be in good hands. God Bless.”

Claudia and Nancy M. - Michigan

We Help Michigan Families Navigate These Situations Every Day

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At Dennis Buys Houses, we’re not just cash buyers — we’re trusted problem-solvers who help Michigan families find real answers during difficult times.

Since 2004, we've been helping homeowners across Michigan sell their properties quickly and easily—without the stress of agents, repairs, or hidden fees.

We’re a family-owned, local business with deep roots in the community. Over the years, we’ve helped hundreds and hundreds of homeowners in situations just like yours—whether they’re dealing with delinquent property taxes, foreclosure, or simply needing a fresh start.

If you're dealing with a tough family situation and don’t know where to turn, we’re here to help.

Start here:

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Whether you’re ready to sell or just want to explore your options, we’re here for you. Call us today, and let’s talk about how we can make your situation easier.

No pressure. No judgment. Just real help when you need it.